ISLAMABAD: Creating hype over purported sovereign default threat, the government on Friday secured a regulatory approval for imposing up to Rs3.23 per unit surcharge on electricity consumers across the country with effect from July 1 for an indefinite period.

The National Electric Power Regulatory Authority (Nepra), in a late-night notification, stated it “has decided to allow application of enhanced surcharges through instant decision to be recovered from different categories of consumers of both XWDISCOs and K-Electric, from the FY2023-24 and onward w.e.f. July 1, 2023”.

The fresh surcharge shall be shown as a separate head in the consumers’ bills, it added.

Under the notification for a new surcharge in the 2023-24 fiscal year, there would be a 43-paisa additional cost per unit to protected consumers, using up to 200 units and agricultural tubewells.

This surcharge would increase to Rs3.23 per unit for all other consumers throughout the next year. Thus, the average national surcharge would work out at Rs2.63 per unit after taking into account the consumers with less than 200 units and agricultural tubewells.

Up to Rs3.23 per unit surcharge will be applicable from July 1

The regulator put on record that according to the ministry of energy, the independent power producers (IPPs) would call Pakistan’s sovereign guarantees without this surcharge.

“As per the MoE, the already allowed surcharges are not sufficient to meet the electric services obligations of the Government, as non-payment to power producers may result in loss of generation capacity and since the payments to the power producers have been secured by sovereign guarantee, issued by the Government of Pakistan (GoP), the power producers shall start calling upon the sovereign guarantees along-with the imposition of late payment surcharge”, it wrote.

Nepra’s order said the MoE further mentioned that National Electricity Policy, 2021, approved by the Council of Common Interest (CCI) under Clause 5.6.1 provides that ’financial sustainability of the sector is premised on the recovery of full cost of service, to the extent feasible, through an efficient tariff structure, which ensures sufficient liquidity in the sector. Also, the ministry of energy reported that in due course, financial self-sustainability will eliminate the need for government subsidies.

Nepra said the power division claimed that presently the financial obligations of the government stood at around Rs2.6 trillion, which includes over Rs1.7tr payables to IPPs and Rs765bn of Power Holding Limited loans.

Through the decision, the total surcharge would be around Rs335bn, which will cover Rs126bn of the PHL markup, and the remaining Rs209bn to cover the flow of circular debt.

On March 6, Nepra had already allowed the government to charge Rs3.82 per unit surcharge for remaining four months of current year and then continue on permanent basis with Rs1.43 per unit surcharge for next fiscal year.

However, the government reverted to Nepra on March 8 with a fresh petition saying the Rs1.43 per unit surcharge for next year was not enough to meet the financial requirements and requested an increase of Rs1.80 to Rs3.23 per unit from July to mop up Rs335bn for paying off debt and cost of power theft of inefficient power companies.

The power division said the government was empowered under the Nepra law to “collect surcharges from the consumers for the fulfilment of any financial obligation of the federal government with respect to electric power services within the bracket of 10pc of the aggregate revenue requirement of all power suppliers”.

Published in Dawn, April 1st, 2023